I love w7. It's stable, fast, and far more secure than XP. I wouldn't ever go back.

I keep all my shit on another drive as well. You can install w7 on your primary HDD and all of your data should still be accessible. Check the minimum specs for w7 as far has CPU speed and GPU, but 2gb of ram would be enough to run it. You'll also need a x64 compatible processor to run a x64bit OS.

If you do upgrade, do a clean install. The upgrade option is worth shit (it's better than XP's upgrade, but i've never trusted it over a full wipe/fresh install).

Also, check out this link (Ninite Easy PC Setup - Silent Unattended Install Multiple Programs At Once). I haven't used it yet, but it might prove helpful.